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As I understand it, OpenID relies on a single trusted service, the OpenID provider. If you run this service on your own server you then have complete control, and you only have to trust yourself (and your ability to correctly configure and run a web service).

Would this be the most secure and effective way to manage your online identity?

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This seems like overkill. There are a lot of sites offering OpenIDs. What aspects are you worried about? That the provider might themselves masquerade as you? That the provider might be hacked and have the user/password files copied and decrypted? If those are your anxieties and you want to relieve them by taking control, you can certainly go ahead. Your server is unlikely to be more secure than the best providers, but the obscurity of your server would likely make it less subject to hacking attempts.

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If you are looking for more control, you could do what I did. I use a sub-domain of personal domain that I own to point to myopenid. So if myopenid ever goes under, has problems, turns evil, etc, I can change providers without changing my openid url.

Edit: it is called OpenID Delegation

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this seems like a neat solution. If the provider is changed, how will that affect 3rd-party sites which already have my OpenID data? –  Alison Apr 13 '11 at 16:31
    
@Alison, it shouldn't effect them at all. Here is some info about it: windley.com/archives/2007/02/using_openid_delegation.shtml –  Echo Apr 13 '11 at 17:50
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